FED:Qld's Wild Rivers may swamp Cape Alumina

Cape Alumina
's auditor says there is some uncertainty over the bauxite explorer's future, in the wake of Queensland's Wild Rivers laws.

Cape Alumina said in its half-year financial report, released on Thursday, that it had booked a loss of $12.6 million for the six months ended December 31, 2010.

The company said the loss was largely the result of an $11.4 million impairment of capitalised exploration and evaluation expenditure related to the Pisolite Hills bauxite mine and port project near Weipa, on Cape York in Queensland.

Cape Alumina had announced the impairment charge on January 28.

The impairment followed a review of the project by Cape Alumina, prompted by the Queensland government's declaration of the Wenlock River Basin as a wild river area.

Cape Alumina said the review had determined 45 per cent of the bauxite at Pisolite Hills was locked up or rendered uneconomic to mine as a result of high preservation areas (HPAs) in the vicinity of the project.

"The Cape Alumina board concluded that this loss means that the project is no longer economically viable under forecast economic conditions and that it cannot proceed unless the HPAs are reduced in size," the company said in its financial report.

"However, because of the uncertainty surrounding the Wild Rivers laws, Cape Alumina will maintain its mining lease applications and will continue the lengthy environmental impact statement process."

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Cape Alumina also said in Note 1 of the financial report: "The ability of the economic entity to maintain continuity of normal business activities, to pay its debts as and when they fall due and to recover the carrying value of areas of interest, is dependent upon the ability of the economic entity to successfully raise additional capital and/or successful exploration and subsequent exploitation of areas of interest through sale or development."

"Without qualification to the conclusion expressed above, we draw attention to the matter set out in Note 1," the auditor said.

The auditor said: "this results in material uncertainty regarding the ability of the consolidated entity to continue as a going concern".

"Adjustments may be required to the carrying value of assets or recorded amount of liabilities should the consolidated entity's plans not eventuate."

When it announced the $11.4 million impairment on January 28, Cape Alumina said it was now focused on developing its Bauxite Hills project, about 60 kilometres north-west of Pisolite Hills.

Cape Alumina also had said on January 28 that it expected the Pisolite Hills project to deliver value to the company at some point in the future.

Cape Alumina chief financial officer and company secretary Scott Waddell said on Thursday the company had already disclosed in its quarterly activities report that it was in talks with a number of parties in relation to potential fund-raising in 2011.

He said Bauxite Hills was looking to be "a very good project" for Cape Alumina.

"Our main focus is on Bauxite Hills, and we believe we've got a project that we're moving forward with," Mr Waddell said.